Courting Trouble

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A healthy degree of shamelessness can be a good thing for entrepreneurs. Shameless self-promotion, for instance, can land a company on the front page of the local paper. Shameless persistence can help score a big client, say, or a bank loan. And shameless frugality can help save a bundle on office supplies. But left unchecked, a lack of shame can also lead business owners astray. Kentucky entrepreneur Tina Conner learned that lesson the hard way.

On October 6, Conner is set to appear in federal court to face mail-fraud charges relating to ST Construction, a business she owned with former husband Seth. Prosecutors allege that Conner, who pleaded not guilty, engaged in a fraudulent scheme to obtain certification as a disadvantaged business back in 2000, in order to score government road-construction contracts set aside for minorities and women. The alleged scam pales in comparison, however, to some of the astounding business behavior to which Conner freely admits. The 41-year-old entrepreneur is notorious in the Bluegrass State for filing a September 2002 lawsuit against Kentucky's Democratic Governor Paul Patton. In subsequent media appearances, she claimed that Patton tipped her off to annual inspections of another business she owned, a nursing home, in exchange for her participation in marathon lovemaking sessions and the occasional ménage â trois. When the affair ended, Conner claims that the governor--by then, a candidate for the U.S. Senate said to have presidential aspirations--dispatched health care inspectors to her facility (which he denies). As a result of numerous citations, the Centers for Medicare and Medicaid Services terminated the 116-bed nursing home's provider agreement.

"You may make a lot of money in the short term that way, but you'll lose in the long haul."

Sure, this soft-core tale is an extreme example of entrepreneurial shamelessness gone awry. But University of Nebraska business professor Marc Schniederjans, who recently completed a long-term research project on small-company ethics, argues that business owners are sometimes drawn into cheating the system because they have so much less visibility than big companies. Entrepreneurs who bend the rules may think they can get away with it because they tend to fly under the radar of regulators and the mainstream media. "I bet you if Conner had a $100 million corporation, she would have thought twice about what she was doing," Schniederjans adds.

Charlie Mattingly, president and CEO of the Better Business Bureau of Louisville, Southern Indiana, and Western Kentucky, says that most businesses he has encountered operate ethically. But when an entrepreneur is exposed for engaging in shenanigans, he or she often pays a heavy price. "I always tell business owners, 'You may make a lot of money in the short term that way, but you'll lose in the long haul," says Mattingly. Conner's nursing home filed for bankruptcy and was recently sold for $2.3 million. If convicted of the federal mail-fraud charges, she could serve time in prison. Legally, she could start a new company one day. Restoring her reputation in the business community may not be so easy.